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RBA Rates Update May 2023

02.05.23 | Marc Barlow | Reserve Bank Announcements

The official cash rate was lifted to 3.85% today after the RBA returned to its strategy of raising rates. 


Following last month’s first pause in cash rate hikes since May 2022, analysts were split on which way the RBA would go today. 


However, the Central Bank Board clearly feels spending requires further restrictive measures despite inflation slowing in the last quarter. 


‘Inflation in Australia has passed its peak, but at 7 per cent is still too high and it will be some time yet before it is back in the target range,’ explained the RBA today.


‘’Given the importance of returning inflation to target within a reasonable timeframe, the Board judged that a further increase in interest rates was warranted today.’


That target rate for inflation is 2-3%. So plenty of work to do, though today’s increase is somewhat at odds with recent economic data. 


Australia’s inflation rate eased during the first three months of 2023 with the quarterly increase the lowest since the end of 2021.


The headline consumer price index (CPI) for the first three months of 2023 was at an annual rate of 7.0%, below the previous quarter of 7.8% reported in December.


The Board held interest rates steady last month to provide additional time to assess the state of the economy and the outlook,’ explained the Central Bank. 


‘While the recent data showed a welcome decline in inflation, the central forecast remains that it takes a couple of years before inflation returns to the top of the target range; inflation is expected to be 4½ per cent in 2023 and 3 per cent in mid-2025.’ 


So, today is not great news for homeowners or investors with a loan. Meanwhile, as rates nudge 4.0%, the national housing market is holding up nicely.  


CoreLogic’s daily dwelling values released in late April showed that across the five major capital city markets, prices rose 0.20%, a seventh consecutive weekly rise. Darwin was the only capital to see a slight drop in average prices.


And with so much focus on cash rates, an independent review into the RBA is set to potentially change the way monetary policy is decided. 


The findings of a report titled “An RBA Fit For The Future” questioned the decision-making process and recommended that the RBA no longer be solely responsible for setting interest rate rises in Australia. 


The review proposes a new monetary policy board be set up within the Central Bank. Times could be changing at Martin Place. 


Meanwhile, the next RBA update on monetary policy is June 6. 


If you want to review your home loan arrangements, contact Mortgage Broker Group.


We can assist with tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household prices.


Mortgage Broker Group operates nationwide, and our service is 100% free to you (although your lender may apply fees and charges).